Reports say central bank will convene on Sept. 20

The central bank will hold its regular quarterly policy meeting on Sept. 20, the Chinese-language Liberty Times (the Taipei Times' sister newspaper) reported yesterday, without citing sources.

The newspaper said the central bank is expected to raise its benchmark interest rates by between 0.125 percentage points to 0.25 percentage points at the meeting to help fend off inflationary pressure.

The Chinese-language Economic Daily News carried a similar report yesterday, saying the central bank could bring its quarterly meeting forward from the original date of Sept. 27, because of concerns over rising prices.

The newspaper, which did not cite any sources, said Taiwan would take its cue from the US central bank.

The US Federal Reserve will hold its monetary policy meeting on Sept. 18.

Taiwan's consumer price index (CPI) rose 1.59 percent last month to a six-month high on hikes for agricultural products, fuel and Chinese medicines, the Directorate General of Budget, Accounting and Statistics reported on Wednesday.

In the first eight months of the year, the CPI climbed 0.62 percent compared with the same period last year, the statistics bureau's data showed.

But a board member of the central bank expressed his opposition to the possible rate hike, saying an increase in interest rates would raise the value of NT dollar and undercut Taiwan's export competitiveness, the Chinese-language United Evening News reported yesterday.

Casey Chuang (莊國欽), chairman of Logitech Inc (邏輯電子) and a central bank board member, said it was inappropriate to use monetary policy to deal with rising prices, because the inflationary pressures were a result of high raw material prices and not excess market liquidity, the newspaper reported.

In June, the central bank raised the benchmark interest rate 0.25 percentage points for the 12th successive quarter, bringing the discount rate, or the interest rate charged to banks for borrowing short-term funds directly from the central bank, to 3.12 percent.

In July, central bank Governor Perng Fai-nan (彭淮南) said that the bank was closely monitoring consumer prices and did not rule out convening an ad hoc board meeting to review its interest rate policy.

Minister of Economic Affairs Steve Chen (陳瑞隆), who is in Sydney for the APEC forum, said yesterday that the nation's economy, which grew faster than expected last quarter, may be able to withstand higher interest rates.

"The level of interest rates in Taiwan is still reasonable and we believe that, so far, the interest rate is not adversely affecting our future economic development," Chen said.

Additional reporting by Bloomberg